Technology|The Stakes Are Rising in Google’s Antitrust Fight With Europe

Supported by

The Stakes Are Rising in Google’s Antitrust Fight With Europe

Image

Margrethe Vestager, the European competition chief, has started investigations into Amazon, McDonald’s and Starbucks, but three cases against Google make up the most public — and longstanding — antitrust cases in the region.CreditCreditFrancois Lenoir/Reuters

By Mark Scott

Oct. 30, 2016

Google is locked in a six-year battle with Europe's antitrust officials. And the stakes for both sides are getting higher.

For Google, Europe’s lengthy effort to rein in how the search giant operates in the region represents a potential threat to the billions of dollars it earns annually from selling online advertising and other, often dominant, digital services across the Continent and beyond.

For Margrethe Vestager, the Danish politician turned European competition chief, the three cases against Google make up the most public — and longstanding — antitrust cases in the region. And they will very likely define Europe’s at times frosty relationship with Google and other American tech giants like Facebook, Amazon and Apple for years to come.

“For the European Commission, it’s a case of Russian roulette,” said Christian Bergqvist, an associate professor of competition law at the University of Copenhagen. “If they lose or merely settle the case, they will look weak. They have to be seen as doing something to stop Google.”

The latest twist in this episode is expected to begin on Thursday, when Google officially starts responding to European charges that it has hamstrung competitors and limited consumer choice.

The separate but closely linked rebuttals to European claims are expected to be submitted to competition authorities in Brussels in quick succession over the next few weeks.

While each response will be couched in legalese, Google’s main argument is that its business practices do not fall afoul of the region’s tough antitrust rules and that competitors can freely offer their own rival digital services to Europe’s more than 500 million consumers.

“Our search engine is designed to provide the most relevant results and most useful ads for any query,” Kent Walker, Google’s general counsel, wrote in a blog post when previously rebutting some of Europe’s antitrust charges. “Users and advertisers benefit when we do this well. So does Google.”

Not surprisingly, the company’s detractors — small European start-ups, some local politicians and American heavy hitters like Oracle — do not agree.

“Google has taken its best shot, but the European Commission has decided that it’s still on the right track,” said Thomas Vinje, a lawyer for FairSearch Europe, a group representing the Google rivals that have filed complaints against the company’s perceived dominance.

“I don’t doubt Google feels like it has a strong defense. But that’s what other previously dominant companies thought, too,” he added.

Whatever happens, Google’s battle in Europe will not end overnight.

European officials must first review the company’s rebuttals, and a final decision in any of the cases is not expected until midway through 2017, at the earliest.

If found to have breached the region’s rules, Google faces fines totaling up to $7.5 billion, or 10 percent of its annual revenue, and may be forced to change how it operates in the 28-member bloc. While any antitrust fine is not expected to reach the maximum possible, the company is likely to appeal any European ruling, further lengthening the process.

Yet it is this death-by-a-thousand-cuts regulatory limbo that arguably represents the biggest headache for Google.

As it deals with the uncertainty over how it will be allowed to operate in Europe, still one of the company’s largest markets worldwide, the search giant is increasingly fighting a battle with other global technology behemoths over how people will use the internet in the future.

Consumers are shifting their online habits to mobile devices, and with that shift, Google’s dominant position in desktop online search (it holds, for example, roughly a 90 percent market share in Europe) is becoming less certain.

And as other rivals like Facebook and Amazon double down on next-generation technologies like virtual reality and artificial intelligence, Google’s regulatory woes in Europe represent an unwanted distraction — one that may eventually hamper its existing, highly lucrative, business model.

Google may face tougher competition in the smartphone world if Europe forces the company to open up Android to rivals, a possibility if the search giant loses its antitrust case in the region.

Further down the line, the company is still struggling to turn its vast array of so-called moonshots, like self-driving cars and internet-connected balloons, into viable stand-alone businesses.

Image

Google’s offices in Dublin. Europe says the company has hamstrung competitors and limited consumer choice.CreditPaulo Nunes dos Santos for The New York Times

“No matter what happens, antitrust is part of the picture for Google for many more years,” said Ioannis Lianos, a professor of global competition law and public policy at University College London. “Even if Google wins, the fact that they are spending resources on this will affect their commercial thinking.”

The stakes are equally high for Ms. Vestager, who has started investigations into a number of American companies, including Amazon, McDonald’s and Starbucks. She also has opened cases against the likes of Gazprom, the Russian state-owned energy giant.

In August, she ordered Apple to repay $14.1 billion in back taxes to the Irish government, claiming the company benefited from unfair tax treatment offered to its Irish subsidiaries. Apple and the Irish government are appealing the decision.

The three Google cases, though, have taken on extra meaning for the European Commission, particularly as a previous settlement proposed by Joaquín Almunia, Ms. Vestager’s predecessor, was killed at the last minute during political wrangling among European officials.

The search giant has become a boogeyman for many in Europe. In part, that is because of Google’s dominance over many of the digital services — like online search and smartphones — that have become essential to people’s daily lives.

Google has tried to win over its local critics, including budgeting roughly $450 million from 2015 to 2017 for spending on cultural and other projects across the Continent. But the antitrust charges against the company have, for many, come to symbolize Europe’s last stand against the almost universal control by American tech giants over the region’s digital landscape.

“We would like to see results so we can show voters that something is being done,” said Ramon Tremosa, a Spanish member of the European Parliament and a Google critic. “At least a fine in the cases would show that there’s a bazooka in Europe that can be shot at companies like Google.”

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Stakes Are Rising in Google’s Antitrust Fight With Europe. Order Reprints | Today’s Paper | Subscribe